The DfT budget is in the order of £12.8 billion (2010/11) which is spent, in order of magnitude, mainly on rail, the Highways Agency, Transport for London, local authorities and emergencies and contingencies. More than two thirds of this is spent through third parties, yet the Department employees something in the order of 17,500 staff with a total administration cost of £277 million. The DfT has been charged to make a 15% reduction in its spending by 2014/15 when compared to the 2010/11 baseline. In order to achieve this, over half of the financial reductions have occurred as a result of cuts or deferrals to new investment combined with increases in fares, rather than fundamental transformation of the way in which such expenditure is commissioned. Any private sector organisation, and indeed local government, would view this commissioning model as a major target area for transformation first, rather than simply rely on frontline service cuts which in the long term are unsustainable.

By way of example, local authorities spend around £2.6 billion on behalf of the Department. Increasingly, we are seeing chunky funding allocations being made through competition mechanisms targeted at the perceived priorities of central government. These competitions can often incur significant costs by local authorities, sometimes with little or no return at all on their investment. Councils can ill afford this type of speculation, especially in the current economic climate. Moreover, it is understandable if local authorities chase the money but very often the bidding process is conducted in discrete silos with little or no coordination between each. The end result can be the implementation of piecemeal interventions which lose considerable opportunity for gaining added value compared to if they were joined together. On other occasions they can bear no resemblance to what are actually the local priorities. All this seems to fly in the face of localism. Whilst the DfT is agonising over how best to tackle the localism agenda the key to the answer is in front of their face – it’s called “local” government.

An alternative model would be to simply passport funding allocations direct to local government and remove all the costly overheads that are currently incurred in policing local transport interventions and measures. No doubt leaving local authorities to their own devices would be seen by the DfT as inconceivable and extremely high risk. But would it? Current Department behaviours, practices and procedures have developed over many years and in the main remain largely unchanged. They have been based on a local government model that could not be trusted and no longer exists. However, the world has moved on and local government has matured, it is sharper, leaner and more innovative. It is well capable of organising its own networks to develop transport policy, set priorities, monitor performance and act as accountable bodies for spending on infrastructure and services. Indeed, many these networks for transport already exist so that the cost of administration would be negligible in the scheme of things given that there is no need to reinvent the wheel. All that is needed is for them to be formalised and given new terms of reference. Government could then focus solely on “outcomes” rather than the procedural minutiae and take out a whole tier of central duplication.

Similarly, the Highways Agency (£3.2 billion spend) could well benefit from a new relational model with the DfT. The recently published report “A Fresh Start for the Strategic Road Network” by Alan Cook has come up with eight key recommendations to help transform the interface between the DfT and the HA. One of these involves the HA working far more closely with local authorities and Local Enterprise Partnerships to initiate and develop a new generation of route-based road strategies. It would only be one step further to completely free up the HA to become an economically viable entity such that the relationship between local authorities and Local Enterprise Partnerships could be much more than just engaging in dialogue and consultation. Freed from the administrative ties of the DfT, the HA could have a more commercial outlook involving proactive conversations regarding sharing of funding, leverage from development and new and innovative ways of raising finance – not just spend DfT budgets.

The argument can be taken further when you consider that £2.7 billion of the department’s budget is spent via Transport for London (TfL). The TfL has demonstrated it capability by developing its own clear transport strategy and that it can deliver efficiently and effectively. What is the point of the DfT being overly concerned when there is already a Mayor in place to critically oversee delivery and value for money. If trust is broken then they DfT have the ultimate ability to simply cut the funding passported, which would be reasonable incentive for most organisations to do things right.

Over the years we have seen the DfT expand, contract, merge and subsequently fragment itself in line with the views of changing governments and financial pressures contemporary to the moment. However, we have never seen it transform. This in part explains some of the inherent problems in our transport system and why it simply takes so long to do anything. A good start of the transformation would be for the Department to concentrate on what it does well, which is to stick to the management of the truly strategic infrastructure and leave everything local to those best place to deal with it. The mechanisms are already in place through local government and all that is needed is a tweak which could save the Government in the order of £200 million per annum by stripping out unnecessary administration and duplication.

However, this blog post will be a short trip down memory lane because todays’ conference is actually the tenth anniversary of the NLGN Annual. Having looked at the original material from that very first conference I’ve been pondering on how far the sector has come over the last ten years. See for yourselves, I’ve copied in the key conference themes below from the inaugural NLGN Annual:

NLGN’s 1st Annual Conference – Key conference themes include:

• Does Central Government Know How to Let Go?
  
• Does Local Government Have the Capacity to Deliver New Localism?
  
• New Localism & Choice – Public Consultation Issues
  
• Is New Localism Left or Right Wing?
  
• How Can New Localism Create Sustainable Communities?
  
• Schools and Community Regeneration
  
• Health & Local Government Partnerships: How Can New Localism Improve Performance?
  
• New Localism: Crime, Communities and Community Cohesion
  
• Community Safety Measures: Police & Local Government Working Together

Localism isn’t ‘new’ anymore but we’re still grappling with a lot of these questions. The focus back at our first conference was very much on partnership; local government and the police, local government and the NHS, Local Government and schools etc… Can we reflect on the last decade and say we cracked it?

Fast forward ten years and a lot of the recent conversations NLGN has convened have ended with the broad acceptance that local government needs to become the facilitator of multiple conversations across the local state and business, brokering and managing relationships. This, oddly enough, is very much in keeping with the themes of the first NLGN Annual Conference. The difference being that now, a decade on, the economic stakes are higher and the social cost of inaction much dearer.

At NLGN’s recent Policy Summit we were joined by Prof. Anne Power of the LSE who spoke on, amongst other things, the importance of history and our understanding and interpretation of it. The accumulated knowledge of the last ten years of how to build and maintain partnerships can’t be wasted as we need it now more than ever. As we increasingly try new things; having some sense of the lessons learned will take on a renewed importance. Understanding where we have been will make it that much easier to know where we are going.

Ultimately though the reason the sector is still focusing on a lot of the same issues is that we will always need to. Relationships need maintaining, policy develops or changes, politicians come and go. The work of local government goes on, delivering services, supporting vulnerable citizens, growing communities, championing local democracy and a myriad of other responsibilities. (Now it would seem ‘delivering economic growth’ should be added to this list.)

It seems fitting then that on the 10th anniversary of the NLGN Annual Conference its purpose and spirit is as relevant today as it was back then.

Liam Scott-Smith

Transport Secretary Justine Greening claimed that: “By following in the footsteps of the 19th Century railway pioneers, the government is signalling its commitment to providing 21st Century infrastructure and connections – laying the groundwork for long-term, sustainable economic growth.” Although this is a laudable vision and one that reemphasises the fundamental role of nationally coordinated investment for economic growth, the government’s lack of clarity with regard to the problem it is addressing is frustrating. It has led to conflict between the centre and localities and further disagreement at the local level between the perceived winners and losers.

Many commentators have already pointed out the shortfalls in the estimated return on investment for HS2. In the 1960s American economist Robert Fogel demonstrated that railways, including the transcontinental lines, did not dramatically accelerate US economic growth. The railways were only slightly better forms of transport than their lower-tech alternatives, such as improved roads and canals. In the UK context building a first train network might have lead to productive growth; building a second may not. Evidence seems to suggest that at best HS2 is a “nice to have”. Surely in a period of financial constraint we should be having a more informed conversation about the infrastructure options available.

The Eddington Transport Study of 2006 noted that, “Historically, new connections have played a pivotal role in periods of rapid economic growth in many economies, but in mature economies with well-developed transport networks it is transport constraints that are most likely to impact upon a nation’s productivity and competitiveness.” Or as Marge Simpson put it more concisely, “But Main Street’s still all cracked and broken.” We should look in more detail at travel pinch points for journeys into London and across the country.

If the government wanted to lay the groundwork for long-term growth, it would be better advised to target infrastructure investments that decrease congestion in cities and their catchment areas, whether this is London, Birmingham or cities in the north of England. It could also support local authorities in coordinating complementary investments that connect northern cities to one another. The electrification of the Transpennine railway, though needed, hardly matches the scale of this challenge.

There are lessons here for local authorities as they seek to incentivise growth using newly devolved fiscal powers, such as the retention of business rates. Local authorities must ensure that they make strategic investments with a clear rationale. They should also engage all stakeholders in decision making, including those that may not directly benefit from economic growth. By prioritising projects with strong potential ROI they will be able to reinvest to benefit local communities, whether that is through more infrastructure or new civic spaces. If local authorities take this approach they should avoid the opposition encountered by HS2 and the mistakes made by the residents of Springfield.

After months of anticipation, the response seemed to provide little clarity on the myriad of new policy initiatives aiming to incentivise growth. There is a danger that the longer central government waits to unveil the details of schemes such as Tax Incremental Finance (TIF), the smaller the appetite to take on these schemes will be. A recent survey conducted by NLGN revealed great enthusiasm for TIF but disappointment at the speed with which central government guidance is being provided. As the global economic climate worsens, new mechanisms of investing into infrastructure are urgently needed to retain existing businesses and attract new business.

A number of decisions were expected due to widespread approval. But the LGRR response also threw a few curve balls with lasting implications for local growth prospects.

Firstly, the most surprising of these developments was the decision to allow district councils to retain a large proportion of business rates whilst assigning county councils to be top up authorities. At first glance, the logic of the county-district split seems clear: as district councils are responsible for planning decisions, they are best placed to create thriving business environments. Additionally, the intention is to push power down to the lowest level where increasing engagement with business might have the greatest financial returns. However, there are a number of less obvious implications which will start to emerge as the political landscape of economic development begins to shift.

This means a greater enthusiasm for pooling of business rate growth will be needed to ensure that infrastructure investments are part of a strategic vision and can create a virtuous circle of investment and business growth. Pooling also has potential to strengthen the role of sub regional governance in driving growth. However are the conditions for pooling there? The government chose not to create a direct financial incentive to pool. Moreover, councils will need to gain permission from central government to come together and share business rate proceeds creating a further disincentive to pooling. This might prove to be a hurdle for local authorities and might further reduce the prospects for collaborative structures to be established at an early stage of the changes.

Lastly, a political shift in power between districts and county councils as a result of the changes is likely. Although counties currently make a number of decisions to unlock growth, particularly in strategic infrastructure, in the future they won’t be seeing the direct financial benefits through business rate retention. To continue a direct involvement of counties in infrastructure investment it will be important to create a new vehicle for countries and districts to work together to prioritise and finance infrastructure projects.

As we await to see how these proposals further pan out, local authorities need to get on with evaluating schemes for pooling and TIF. This way as soon as further central guidance is available, these initiatives can be put into full speed. The longer we wait, the greater the risk that territorial struggles will slow this down. Early involvement of all players in the growth agenda will be essential and it looks like local authorities will need to take a leading role.

Germany provides an exceptional lesson in providing affordable social housing, even in booming housing markets like Hamburg and Berlin and it does so by using the sort of community cooperative the Coalition normally lionises.

Relying on a lattice work of venerable urban Genossenschafts (‘Housing Associations’ though with different connotations to the UK’s conception of the term), urban Germans can find affordable housing whose governance, upkeep and financial management is led by a board elected by the tenants themselves. Building on traditions dating back to the mid to late 1800s, the model is centred on tenants buying shares of their building or block with the commitment not sell or individually speculate with their stock. This deposit of shares, typically several thousand Euros worth, can earn interest and in some schemes double as a bank account, providing a core amount of shares is maintained. Rents are kept at below market rates. When tenants leave they get their shares back, invariably with interest. Should Genossenschaft run into trouble, the Government provides targeted support but emphasises the independence of the board.

The Genossenschafts are particularly adept at providing for the needs of those who risk social exclusion. The de-facto bank accounts can offer good returns and a chance to save for those unable to access mainstream banking. The sense of collective effort and ownership promotes community centred social capital. Across the landscape of Genossenschafts, benefits like community run free language classes, income protection schemes, home visits for elderly tenants, crèches, collectively negotiated contracts for fuel and a host of other benefits are common.

Though many predicted the Genossenschafts would disappear with the gentrification of their high density heartlands, many have worked so well they have actually expanded. In newly desirable areas like Altona in Hamburg, Genossenschafts led the charge by upgrading housing stock when many parts of the borough were still seen as deprived and high crime back waters by private investors. In total associations account for 6.4 million dwellings or 17% of all homes in Germany, a figures that is relatively stable.

Housing cooperatives are uncommon in the UK, making up about 0.1% of housing stock. Though there has been some progress London and North West, this remains an under used option for delivering affordable housing. With the right leadership and seed investment, Germany provides an object lesson for what can be achieved.

Whilst we spend a lot of time thinking about the best way to spend, we spend less time examining how we raise money and whether we can use the tax system more intelligently for the benefit of our communities.

With support from the NESTA ‘Creative Councils’ programme, Essex County Council is doing just that by exploring an innovative idea to incentivise socially responsible behaviour through the tax system. There is increasing national interest in the concept of behavioural economics, and how individual and collective behaviour can be ‘nudged’ to support improved outcomes. Using this as its basis, we are investigating the feasibility of providing rewards, linked to council tax, in areas where individual and collective behaviour reduces the costs of local services. For instance, landfill tax currently costs £56 a tonne and this is due to increase year-on-year.

There is a direct correlation between residents’ behaviour with respect to waste creation and disposal, and the amount of tax paid as a consequence. There are numerous other examples which we could explore – supporting families, neighbourhood watch, keeping healthy, increased volunteering – to name but a few. Our idea is to create a scheme whereby savings generated are shared with those participants – incentivising behaviour change, reducing costs, and helping residents to better understand the impact of their behaviour on our costs and theirs – through the taxes they pay.

We know that the development of such a scheme will be complex: there are practical issues to work through – tracking behavioural changes at individual/ community level, measuring the impact of these changes, defining the value and mechanism of rewards etc. But if these can be resolved, this proposal could fundamentally change the relationship between local services and the citizens who fund these through council tax.

Over the next four months, we will be working with colleagues from NESTA to further develop our proposal – exploring these issues, consulting service managers, front line experts, finance and legal advisors, and working with communities to develop prototypes. We, together with our colleagues in NESTA, think the potential benefits make this innovative idea worthy of greater exploration.

Certainly, the central government has a role articulating a national growth vision. Enterprise Zones (EZs) is one policy instrument by which it tries to prioritise and shift investment into specific locations and sectors. Nevertheless, this policy has a touch of paternalism as assumes underneath that central authority knows what is best for all and how it should be achieved. Discretion remains in the hands of central government who chooses the criteria and the final allocation of EZs.

There has been some scepticism, supported by the 80s’ experience, on the effectiveness of EZs to promote real growth in the long term. The greatest critique is that instead of creating new businesses and jobs, they displace economic activity from surrounding areas and when the benefit time expires, businesses move out again. I believe here is the shortcoming of the rebalancing strategy between regions. The approach, more than a matter of language, is misplaced since ‘balancing’ implies the objective is to take from one side to put into another. The overall growth effect of such an approach is left unchanged driving even greater competition between authorities for EZ resources, businesses and jobs, despite the fact that current bids had to be made by LEPs rather than single local authorities may help to reduce displacement incorporating EZs into a wider development strategy.

Relying on fiscal benefits for firms in selected locations is not proven to be the most successful strategy for long term growth. In the eighties’ EZs only 13,000 of the 63,300 were new jobs and investments in physical capital rather than in intangible assets vital for the knowledge economy were favoured .The dependence on fiscal incentives leads to temporarily ‘import’ of resources as firms try to take advantage of them.

Thus, instead of awarding benefits to selected zones, the strategy should be focused on improving all LEPs’ -not only those with EZs- capacity to stimulate growth. Local fiscal capacity is important to give authorities incentives and resources to support their policies. NLGN’s recent white paper shows that there are some current proposals in this sense but “the devil is in the detail” and the final design of business rates and TIF is yet to be set.

Much will depend on how authorities use newly generated resources. Policies for skills improvements and physical and digital connectivity are necessary to pass from a short lived boom to starting virtuous cycles creating additional economic opportunities and employment. The UK is one of the developed countries with lower investments in R&D (Less than 2% of the GDP ), and local governments could help to increase it, which is necessary to improve the manufacturing sector performance by moving it towards high value-added products, the use of new technologies and innovative production processes.

In conclusion I believe that EZs promote an environment in which local authorities and partnerships are passive actors, waiting for the economy or the central government to assign EZs and ‘rebalance’ in their areas. Instead, policies should focus on ‘rescaling’ the value of the economy by investing in human capital and technological improvements. Such an approach will not only make a particular region more attractive to private businesses but also drive general prosperity and growth across regions.

The ‘Big Society’ seeks to re-cast the relationship between citizens and state; irrespective of its success, pioneering moves towards giving citizens a greater say in the design and delivery of local services present a risk of the vocal minorities crowding-out the hushed majority.

PA, with NLGN, has conducted research to understand the impact of current trends on ‘future citizens’ – revealing compelling visions of their relationships with the local state. Some – the excluded or disinterested –lack a voice, unable to be heard above the din of a vocal few. Two key factors are assumed in the creation of the citizen power-base: the divide between the technological ‘haves’ and ‘have-nots’, and the political power of senior citizens.

Those on the right side of the e-divide will leverage social networks to promote their views. These resourced and technologically-aware citizens connect with causes worldwide. Neighbourhood priorities – on locally emotive issues such as planning – could be unduly influenced by a worldwide audience aligned by non-geographic ‘communities of interest’. NIMBYs enjoy nationwide backing, damaging the principle of local needs reflecting local politics.

Alongside this, growth in the elderly population – supported by increasing life spans and low birth rates – allied to a traditionally high propensity to vote, will give senior citizens a uniquely powerful say. Their electoral mandate will increasingly allow them to define service provision, perhaps to the detriment of services more commonly used by other demographic groups. Will this result in disproportionate investment in home care at the expense of youth services?

The scale of the e-divide means vast sections of society – including the disabled, those in isolated rural locations, and the elderly – are much more likely to be ‘off-line’. Councils will need to make sure they offer a mix of new and traditional channels, reach out to the ‘e-divided’ and invest further in rural connectivity. Social media will need to be actively managed – and strongly moderated – if it is to generate useful insight and allow opportunities for participation.

Meanwhile, although underrepresented digitally – especially by the ‘young upstart’ social media – demographics are shifting towards the elderly, who continue to participate in force at the ballot box. Balancing the traditional voice within the council chamber with real-time, issues-led and technologically aware social networkers will be a challenge. Trickier still will be balancing these against quieter voices, to ensure a ‘big society’ that’s also big on fairness.

How will we balance these voices – and ensure fairness – in this conversation between citizens and state? Join the debate and contribute to ‘Understanding Future Citizens’, our joint research report, due for publication by NLGN in early 2012

Although I am relatively new to the ways and workings of local government, I can’t help but think that the data debate is really quite important and yet, despite immersing myself in all sector related news, white papers, blogs and the twitterati, the consultation seemed to go out not with a bang but rather more a whimper. It’ll be interesting to find out how many local authorities participated in the debate.

Of course, data is vital in the design of public services. However, given the fact that we are living in the internet age, the consultation points out two key points that show that we are really only at the beginning of understanding how we (local government) can use data and information in the most effective way:

1. Local public services collect data but do not always make it available in accessible public formats
2. Finally, Open Data can be a driver of economic growth. At present the market for information on public is highly underdeveloped.

The first point is an issue that the sector slowly appears to be coming round to. Both in terms of service design and in terms the issues of accountability and transparency that Open Data can address. Nesta’s Make it Local programme and websites such as OpenlyLocal are good examples of this. However, it is the second point that is of massive concern but also opens up real potential. Just in case you missed it: Open data can be a driver of economic growth.

Economic growth is the one of, if not the, top priority for local government and this was absolutely reinforced from speaking to our Innovation Network members. With Whitehall lacking in a national plan for economic growth, local councils need to be a driving force and either support the creation of local jobs or link citizens into neighbouring economies where they may be more likely to get a job. And where Local government has access to public data, this would seem like a great resource just waiting to be tapped. The data-debate needs to shift to one no longer centered on accountability and transparency, but where actually the opening up of data can be a powerful tool for localist economic growth.

But how? The consultation states that:

Open Data across government and public services would allow a market in comparative analytics, information presentation and service improvement to flourish. This new market will attract talented entrepreneurs and skilled employees, creating high value-added services for citizens, communities, third sector organisations and public service providers, developing auxiliary jobs and driving demand for skills.

So there you go. A market place for data could allow entrepreneurs to have access to datasets and ‘mash-ups’ with which they could create new services, organisations and ideas to drive forward the economy. Not only do we have public service innovation, but local government is now a platform for business creation and economic growth.

Whilst there are obvious challenges to achieving this with technical, legislative and financial barriers, if we shift the narrative, then there is clearly an Open-Data-for-economic-growth debate that the sector can really start to engage in.

To illustrate how far 250 million pounds could go, below is a sample list of all the services that money could buy:

1524 2 bedroom affordable homes
2.8 million kindles – equivalent to 619 kindles for every public library in the UK
125,000 roof mounted microwind systems for social houses
10,400 mast mounted wind turbines
Treatment of 186,000 drug addicts
9,4 mln meals for the elderly
33,500 elderly individuals receiving home care for a year
892,251 after school sessions of an after school club
5,528 nurses trained
364,325 primary school children fed for a year
57 cycle superhighways built
1,5 mln residential broadband connections for a year
3945 learning disabled individuals in residential and nursing care
194, 799 activity holidays for disabled children

As this list demonstrates, choices about how to spend public money can be considered subjective unless they are rooted to genuine priorities. Some councils may need more affordable housing, others may need more sustainable energy. It follows therefore, that those who will witness the impact of spending should hold the decision of how it is spent. So whether local areas would choose to provide treatment for drug addicts or on increasing the number of free meals offered in schools, they should be given that option. By paying councils that reintroduce weekly collections 250 million pounds, DCLG is taking a huge step back in its localism agenda.

Daria Kuznetsova (NLGN)